Attached files
Exhibit 99.1
February 17, 2010
Mr. John Williams
Endeavour International Corporation
114 St. Martins Lane
London WC2N 4BE
United Kingdom
Dear Mr. Williams:
In accordance with your request, we have audited the estimates prepared by Endeavour International
Corporation (Endeavour), as of December 31, 2009, of the proved reserves and future revenue to the
Endeavour interest in certain oil and gas properties located in the United Kingdom and the United
States. It is our understanding that the proved reserves estimates shown herein constitute all of
the proved reserves owned by Endeavour. Endeavours estimates of future revenue for the audited
properties exclude the companys abandonment liability for developed fields for which there are no
associated proved reserves. We have examined the estimates with respect to reserves quantities,
reserves categorization, future producing rates, future net revenue, and the present value of such
future net revenue, using the definitions set forth in U.S. Securities and Exchange Commission
(SEC) Regulation S-X Rule 4-10(a). The estimates of reserves and future revenue have been prepared
in accordance with the definitions and guidelines of the SEC and, with the exception of the
exclusion of future income taxes, conform to the FASB Accounting Standards Codification Topic 932,
Extractive ActivitiesOil and Gas. This report has been prepared for Endeavours use in filing
with the SEC.
The following table sets forth Endeavours estimates of the net reserves and future net revenue, as
of December 31, 2009, for the audited properties:
Net Reserves | Future Net Revenue ($) | |||||||||||||||||||
Oil | NGL | Gas | Present Worth | |||||||||||||||||
Category | (Barrels) | (Barrels) | (MCF) | Total | at 10% | |||||||||||||||
Proved Developed Producing |
1,211,755 | 26,347 | 4,457,678 | 37,279,400 | 37,529,700 | |||||||||||||||
Proved Developed Non-Producing |
150,351 | 0 | 4,578,226 | 25,571,300 | 23,712,300 | |||||||||||||||
Proved Undeveloped |
1,973,070 | 4,923 | 80,063,968 | 85,655,100 | 13,079,600 | |||||||||||||||
Total Proved |
3,335,175 | 31,271 | 89,099,888 | 148,505,800 | 74,321,600 |
Totals may not add because of rounding.
The oil reserves shown include crude oil and condensate. Oil and natural gas liquids (NGL) volumes
are expressed in barrels that are equivalent to 42 United States gallons. Gas volumes are
expressed in thousands of cubic feet (MCF) at standard temperature and pressure bases.
When compared on a field-by-field basis, some of the estimates of Endeavour are greater and some
are less than the estimates of Netherland, Sewell & Associates, Inc. However, in our opinion the
estimates of Endeavours proved reserves and future revenue shown herein are, in the aggregate,
reasonable and have been prepared in accordance with generally accepted petroleum engineering and
evaluation principles. These principles are set forth in the Standards Pertaining to the
Estimating and Auditing of Oil and Gas Reserves Information promulgated by the Society of Petroleum
Engineers. We are satisfied with the methods and procedures used by Endeavour in preparing the
December 31, 2009, estimates of reserves and future revenue, and we saw nothing of an unusual
nature that would cause us to take exception with the estimates, in the aggregate, as prepared by
Endeavour.
The estimates shown herein are for proved reserves. As requested, Endeavours estimates of
probable and possible reserves that exist for these properties have not been included. Endeavours
estimates do not include any value for undeveloped acreage beyond those tracts for which
undeveloped reserves have been estimated. Endeavour has included estimates of proved undeveloped
reserves for certain locations that would generate positive future net revenue but would have
negative present worth discounted at 10 percent based on the constant prices and costs discussed in
subsequent paragraphs of this letter. These locations have been included based on the operators
declared intent to drill these wells, as evidenced by Endeavours internal budget and reserves
estimates. Reserves categorization conveys the relative degree of certainty; reserves
subcategorization is based on development and production status. The estimates of reserves and
future revenue included herein have not been adjusted for risk.
Oil and NGL prices used by Endeavour are based on the 12-month unweighted arithmetic average of the
first-day-of-the-month price for the period January through December 2009. For United Kingdom
properties, the average Dated Brent price of $60.40 per barrel is adjusted by field for quality,
transportation fees, and regional price differentials. For United States properties, the average
West Texas Intermediate price of $61.08 per barrel is adjusted by field for quality, transportation
fees, and regional price differentials. All oil and NGL prices are held constant throughout the
lives of the properties.
Gas prices used by Endeavour are based on the 12-month unweighted arithmetic average of the
first-day-of-the-month price for the period January through December 2009. For United Kingdom
properties, the average National Balancing Point spot price of 31.81 pence per therm (equivalent to
$4.96 per MMBTU) is adjusted by field for energy content, transportation fees, and regional price
differentials. For United States properties, the average Henry Hub spot price of $3.86 per MMBTU
is adjusted by lease for energy content, transportation fees, and regional price differentials.
All gas prices are held constant throughout the lives of the properties.
Lease and well operating costs used by Endeavour are based on historical operating expense records.
These costs include the overhead expenses allowed under joint operating agreements along with
estimates of costs to be incurred at and below the district and field levels. Headquarters general
and administrative overhead expenses of Endeavour are included to the extent that they are covered
under joint operating agreements for the operated properties. Lease and well operating costs are
held constant throughout the lives of the properties. Endeavours estimates of capital costs are
included as required for workovers, new development wells, production equipment, and abandonment.
The future capital costs are held constant to the date of expenditure.
The reserves shown in this report are estimates only and should not be construed as exact
quantities. Proved reserves are those quantities of oil and gas which, by analysis of engineering
and geoscience data, can be estimated with reasonable certainty to be economically producible. If
the reserves are recovered, the revenues therefrom and the costs related thereto could be more or
less than the estimated amounts. Because of governmental policies and uncertainties of supply and
demand, the sales rates, prices received for the reserves, and costs incurred in recovering such
reserves may vary from assumptions made while preparing these estimates. Estimates of reserves may
increase or decrease as a result of future operations, market conditions, or changes in
regulations.
It should be understood that our audit does not constitute a complete reserves study of the audited
oil and gas properties. Our audit consisted primarily of substantive testing, wherein we conducted
a detailed review of all properties. In the conduct of our audit, we have not independently
verified the accuracy and completeness of information and data furnished by Endeavour with respect
to ownership interests, oil and gas production, well test data, historical costs of operation and
development, product prices, or any agreements relating to current and future operations of the
properties and sales of production. However, if in the course of our examination something came to
our attention that brought into question the validity or sufficiency of any such information or
data, we did not rely on such information or data until we had
satisfactorily resolved our questions relating thereto or had independently verified such
information or data. We used standard engineering and geoscience methods, or a combination of
methods, such as performance analysis, volumetric analysis, analogy, and reservoir modeling, that
we considered to be appropriate and necessary to establish the conclusions set forth herein. Our
audit did not include a review of Endeavours overall reserves management processes and practices.
In evaluating the information at our disposal concerning this audit, we have excluded from our
consideration all matters as to which the controlling interpretation may be legal or accounting,
rather than engineering and geoscience. As in all aspects of oil and gas evaluation, there are
uncertainties inherent in the interpretation of engineering and geoscience data; therefore, our
conclusions necessarily represent only informed professional judgment.
Supporting data documenting this audit, along with data provided by Endeavour, are on file in our
office. The technical persons responsible for conducting this audit meet the requirements
regarding qualifications, independence, objectivity, and confidentiality set forth in the Standards
Pertaining to the Estimating and Auditing of Oil and Gas Reserves Information promulgated by the
Society of Petroleum Engineers. We are independent petroleum engineers, geologists, geophysicists,
and petrophysicists; we do not own an interest in these properties and are not employed on a
contingent basis.
Sincerely, NETHERLAND, SEWELL & ASSOCIATES, INC. Texas Registered Engineering Firm F-002699 |
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By: | /s/ C.H. Rees III | |||
C.H. (Scott) Rees III, P.E. | ||||
Chairman and Chief Executive Officer | ||||
By:
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/s/ Derek F. Newton
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By: | /s/ David E. Nice
|
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Vice President | Vice President | |||||||||
Date Signed: February 17, 2010 | Date Signed: February 17, 2010 |
DFN: JLM